By Laila Kearney

NEW YORK (Reuters) -Oil prices slipped lower on Monday after Iran's weekend attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict that could displace crude barrels.

Brent futures for June delivery settled at $90.10 a barrel, down 35 cents, or 0.4%. U.S. crude futures for May delivery fell 25 cents, or 0.3%, to end at $85.41 a barrel,

Oil dropped by more than $1 a barrel earlier in the session before paring some losses after Reuters reported that Prime Minister Benjamin Netanyahu had summoned his war cabinet for the second time in less than 24 hours, citing a government source.

The benchmarks had risen on Friday in anticipation of Iran's retaliatory assault, with prices soaring to their highest since October.

Israel's interception of Iran's attack, which involved more than 300 missiles and drones, calmed fears of a regional conflict affecting oil traffic through the Middle East.

"The success of the Israeli defense implies that the geopolitical risk has pulled back considerably," said Bob Yawger, director of energy futures at Mizuho bank.

Strong U.S retail sales data from the Commerce Department also hindered oil prices, Yawger added, by increasing the likelihood that interest rates in the world's biggest economy would remain higher for longer and reduce demand for oil.

"The key term in that whole scenario is demand destruction," Yawger said.

In the Middle East, Iran saying it considers its retaliation to be over has further lowered the geopolitical temperature, said Kpler analyst Viktor Katona.

Meanwhile John Evans at oil broker PVM said the Iranian drone and missile attack was "about as telegraphed a world event that people can remember."

"They might as well have had big disco lights on them and towed banners with ‘come on, ladies and gentlemen, please shoot me down.’"

The attack, which Iran called retaliation for an air strike on its Damascus consulate, caused only modest damage, with missiles shot down by Israel's Iron Dome defence system.

Iran produces more than 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries (OPEC).

Middle East hostilities centred on the Israel-Hamas conflict in Gaza have had little tangible impact on oil supply so far.

"If the crisis does not escalate to a point that creates supply disruptions, then there will be downside risk over time, but only once it becomes clear Israel has chosen a measured response," said Amrita Sen, founder and director of research at Energy Aspects.

Rising U.S. oil output also weighed on oil prices, with the U.S. Energy Information Administration saying output from top shale-producing regions will climb by more than 16,000 barrels per day (bpd) to 9.86 million bpd, or the highest level in five months.

(Additional reporting by Natalie Grover in London, Colleen Howe in Beijing and Emily Chow and Florence Tan in SingaporeEditing by Nick Zieminski and Marguerita Choy)